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Comment by alephnerd | Hacker News Reader

It's because the UK is so good at financial services.

It's fairly easy to deploy capital in the UK in mainland Europe, the US, India, China, ASEAN, and Middle East, which means there isn't much of an incentive to deploy it within the UK in industries that the UK cannot compete directly in.

For example, Dyson has almost entirely shifted operations to ASEAN (Phillipines and Malaysia primarily).

And AugustaWestland/Leonardo, Rolls Royce, AstraZeneca, GSK, BT Group, JLR, and BAE have largely shifted operations to the US and India.

The UK could make it harder to offshore, but then that also destroys the UK's entire financial and services industry, because most of the capital in the UK exists because it's a connector for global markets and would leave if that is ended.

They're damned if they do, damned if they don't.

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I think "capital" is the wrong word for it. We've got a lot of money lying around, but capital implies something productive can be done with it. We can't eat money, and we can't tax it or else they'll screw off. Perhaps if we stopped acting as the worlds fixer for tax dodging we would end up being better off. I can't help but view the City as a kind of tumour, sucking the life out of the rest of the country to enlarge itself.

I think most folks when say Capital they mean “Finance Capital” which UK is really good at. Even historically speaking UK was at the forefront of financial engineering which complimented their physical engineering and enabled to spread their empire and colonize so much.

But UK post WW-2 and specifically post Thatcher stopped investing in physical engineering and overindexed on financial services the results are for all to see now.

But you are right. I think the financial engineering has reached its limits and we see China’s investment in physical engineering over last couple of decades beginning to pay off.

The Chinese strategy of forcibly keeping their financial sector depressed seems pretty sensible as a long term strategy.

On the other hand, the UK has all these cheap engineers. Is it just that they're not actually cheap, on the international market?

Rent, taxes and industrial regulation plays a big part. As does power costs. Then there is political costs, it’s hard to rely on UK politicians not doing foolish things and tanking your company on a whim.

Cheap compared to the US. On-par for most of the Western world. Expensive on the international market.

Not really. UK salaries are largely comparable to those for a similar caliber of talent in China or India ($30-50k mid-career is doable in both markets).

The difference is countries like India, Czechia, Poland, Israel, Romania, etc all provide competitive tax incentives or subsidizes for R&D work, so you can hire competitive talent AND get preferential tax treatment.

It was always going to be a trap, but it’s been so long in the making that those who started the UK on that path have long since retired wealthy.

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